Fund flows into equities are very, very strong across the world and that's not allowing markets to behave rationally,
That's according to Jinesh Gopani, head of equity at Axis Mutual Fund, who urged investors to not get carried away by this rally. “Fundamentals are getting discounted.”
The Nifty 50 Index has gained by over 40% from the four-year low it witnessed in March, when Prime Minister Narendra Modi announced a national lockdown to curb Covid-19 outbreak. The benchmark is, however, nearly 1,500 points away from its all-time high.
Gopani said he's yet to gauge the full impact of the restrictions imposed to fight the pandemic on businesses and the economy. “It's difficult to say whether it'll be a V, U, W or L-shaped recovery,” he said.
Meanwhile, Axis Mutual Fund is sticking to its tried and tested strategy of backing companies with “top quality managements that understand their businesses well and can navigate difficult phases”.
Apart from financial sector firms, Axis Mutual Fund's portfolio mainly has companies geared toward the lowest debt levels possible, Gopani said. Companies with strong balance sheets, he said, can focus their efforts on battling the impact of Covid-19.
The fund is also looking to invest in fintech and technology firms that could witness an upsurge in demand in the new normal where business models adapt to the pandemic, Gopani said.
The fund manager also expressed interest in the life insurance sector. The “push product” may become a “pull product” as people face risks associated with the coronavirus infection, he said.
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